House Prices collapse deflated US household net worth

Since the sub-prime home loan bubble burst in 2007 causing house prices to fall 40%, Americans have suffered a record decline in household wealth to 1992 levels

According to a Federal Reserve report on the recent recession, the median family's net worth dropped nearly 40 per cent during the three-year period, and this is linked directly to declines in house prices.
This was the biggest drop in net worth since the survey started in 1989.

House equity linked to net worth?

The problem I have with this notion is that the family home should never be viewed as an investment, and no self respecting financial planner would use the family home as a gauge of personal wealth.

Household wealth in the US now stands at 1992 levels as house prices slid

The median net worth, [the value of assets less debts], plunged from $126,000 to just $77,300 in 2010 , which brings it thudding back to 1992 personal wealth levels. These figures also show that most people's "wealth" is tied up in their homes. Which says a lot for the real wealth of people in the US.

Personal wealth in the US appears to be a mirage, if you accept the notion that a home should never be included in a net worth sum.

"Housing was of greater importance than financial assets for the wealth position of most families," the Fed said.
"A substantial part of the declines observed in net worth over the 2007/10 period can be associated with decreases in the level of unrealized capital gains on families' assets," the Fed said.
"The share of total assets of all families attributable to unrealized capital gains from real estate, businesses, stocks, or mutual funds fell 11.6 percentage points to 24.5 per cent in 2010," it said.

We must be forget that many in the US used their homes as cash machines and extracted all the equity from them to fuel their lifestyles, so they would have suffered hard, and many of those would have lost their homes or had their net worth under water.

Household debt levels overall are unchanged

While the overall level of debt owed by families was unchanged, debt as a percentage of assets rose to 16.4 per cent in 2010 from 14.8 per cent in 2007 because the value of the underlying assets, especially housing, decreased faster.

People shed credit card debt.

The share of families carrying a credit card balance fell 6.7 percentage points to 39.4 per cent in 2010. The median balance fell 16.1 per cent to $2,600 in 2010 from $3,100 in 2007. The proportion of families with debt payments greater than 40 per cent of their income was nearly unchanged between 2007 and 2010. These were obviously people who were caught in the debt trap but retained their jobs.
People have hitched their wagon to house prices always appreciating, as a way to built net worth. This is faulty thinking in my view, and why the US housing market has not recovered. It is simply seen as a bad investment, instead of what it is, Place to live and bring up a family in a stable environment.
 Mr Mortgage

Payday Lender: 5 year ban from the Industry for unlicensed lender

Australian unlicensed payday Lender get 5 year ban from the Industry by ASIC

The Australian Securities and Investments Commission [ASIC] has handed a five-year ban to an unlicensed payday lender, saying unlicensed lending poses a risk to the public.

Banned payday lender named

Victorian payday lender Victor Manatakis has been banned by the regulator after an investigation uncovered that his business was conducting credit activities without an ACL.
Manatakis's business, Billpal, was the operator of payday lending business Cashpal.
ASIC found that between August and October of 2011, Billpal issued credit contracts despite the fact it held no licence.

Unlicensed lending could pose a risk to the Public

ASIC commissioner Peter Kell said the unlicensed lending could pose a risk to the public.
"People in the consumer credit industry need to be aware of the licensing requirements and the implications they will face if they fail to meet these requirements," Kell said.

Mortgage Broker: Paperwork and compliance relief announced at FBBA

Australian Government Announces reduction in broker compliance burden at FBAA conference

What I like about the FBAA is that they get results that benefit Mortgage and Finance Brokers, not just lenders.

As an ex-Mortgage broker, I have been lobbying the Federal Government Ministers, including the Minister for Small Business [ The HON Brendan O'Connor, whom I consider a real asset to small business in Australia] about the burden that recent laws have placed on Mortgage brokers.
So I am happy to see that they are looking to relax the compliance requirements placed on brokers.

The FBAA Conference announcement

Speaking at the inaugural FBAA conference in Sydney yesterday, the leader of the deregulation task-force told attendees that the government was in the process of reducing the costs and time associated with regulation and compliance.

Mr Sinodinos has worked in the finance industry says the government wants to hear broker feedback on the matter, so as to speed up the whole process and implement initiatives that are well received by the industry.

“Our job is to identify ways to reduce the cost burdens of regulation and compliance on businesses with a focus on small businesses,” he said.
“I recently spoke to a person in Brisbane and he said that, for mortgage brokers, one hour with a client results in six to seven hours of paperwork.
“I’m looking to reduce this time spent on paperwork. I think there is a way we can save brokers at least $1 billion in compliance and business costs. And, I think we can even go further than that.”

This has to be good news for Australian Mortgage Brokers. Great work from the FBAA!

Other people's low interest money. The scourge that destroyed the US and the European economies.

Is the RBA right on the money with interest rates?

A lot of the Australian media is pushing the story that  interest rates are too high. But is the RBA on the money on this one?

Everybody seems to have a fixation and an opinion on interest rates these days, and you would think that lower interest rates would fix everyone's problems the way the media is attacking the RBA [Reserve Bank of Australia] these days.

But there are a growing number of people who actually want higher interest rates, especially the self funded retirees that gravitate to savings deposits. For them the higher the interest rates, the better.

The fact is that the RBA has two primary functions it uses interest rates. 

1. To contain inflation. And that band has been set at the Goldilocks rate between 25 and 2.8%. Higher or lower it acts.
2. To keep unemployment low.

On the basis that these two factors have been delivered, how could anyone argue against the RBA settings on rates?

Why low interest rates have destroyed the World Economy

let's keep this simple so anyone can understand it. 

What is the Euro, the US and even Australia's greatest problem? 

People have spent too much on over priced assets. Now they pay with higher interest rates and falling asset values. They are caught holding the problem. In Europe those interest rates are going to be sky high.

What made them do that?
They had cheap money thrown at then and they could not resist it.

What we are seeing now is two things.

1. The consequences of that spending binge, as people struggle under that debt and interest rates as their assets deflate.
2. Vested interest insiders pumping up and then deflating the markets with rumours of fixes and ruin, to give them the margins to profit of both rises and declines in values of shares.

The result is that people are constantly bombarded with false information that is repeated in the news. That fact is that a depression is spreading over Europe, and Governments have to force people into lower home values and suffering with lower expectations, or revert to their own currencies and deflate that value of their currencies, and so the value of assets by using the markets. And that means the break up of the Euro.

That's why Britain was wise to realise that it had to retain the Pound, and keep that possibily open to them.

The nonsense we here about interest rates.

What are people saying we need to do? Lower interest rates. Why? So people can suck up more debt, and buy over priced homes, and get retailing at the dizzy heights it was when people were spending like there was no tomorrow? They must be kidding.

If or China slows buying are minerals, we will have to deflate the value of our assets, so isn't it better not to add fuel to the fire now? BUt we have no control over that because we don't control the Euro, or the Chinese domestic economy or the US economy.

The Euro issues, and how it affects us.

There is also a lot of bellyaching about the Euro and how it affects us. The rise of the prophets of doom, headed by their "poster boy" Tony Abbott. Although I am sensing a turn in believing he is a contender for leading the Nation.

What caused the change?

We see great numbers on Australia's economy, so even though interest rates are lowered, the AU$ is rising.

Everyone is waking up to the fact that the Euro problems have been around for four years or more. And they won't go away in the next four years. In fact they won't go away in my view till the Euro is disbanded, or Europe becomes one political power, and that latter won't happen.

Australia will never have that problem because we have a floating Currencies and are the masters of our destiny. Keeping interest rates high is the solution to the problem, not the problem.

What is the connection to low interest rates and the Euro problem?

Its about Nations spending too much of other peoples' money because it was cheap. That created an illusion of being wealthy when you are not.
What does lower interest rates do. Make people want to spend other people's money. The cause of the problem in the first place.

My advice on interest rates to joe public. 

• Cut up your credit card. If you can't pay cash, you don't need it.
• If you don't have the money, don't buy it. 
• If you see a car ad with a 2.9% interest rate, keep walking! that's why we got into this pickle in the first place.

Yes I have said that the interest rates were set too high, and should be lower, faster.

But was I right? The figures on the economy have vindicated the RBA and proved me wrong.

Will we see more easing in interest rates. 

We probably will see lower interest rates, but hopefully that will not rise house prices, because they are already too high.

• Low interest rates and easy money caused the problem we now have.
• Lower interest rates will not fix it.

To those that link the Australian economy to the Titanic, I say this.

The iceberg was low interest rates and easy money. That is not the solution to a stronger Australian Economy.
The answer is people saving more, and spending less, so we don't have to borrow money from Europe to meet lending demand.

Interest rates will go lower, but don't let that make you spender too much on your next home. We happy with less. Less home, less gadgets, less debt, less junk, less mortgage.
Source: Mr Mortgage

Credit Cards: RBA Announces end to unreasonable credit card surcharges

Credit Card Surcharge: Reverse Bank to bring the fair and reasonable test to surcharges of credit cards 

Australia's central bank, the Reserve Bank of Australia seems to be coming more proactive in the regulation of the business of banking RBA is targeting excessive credit card surcharges. 

The ripoff off merchants include big brands such as Qantas, Virgin, and Cabcharge

The Reserve Bank has finally set the sunset clause on the credit and debit card surcharge earner on January 2013, with what they term a variation in surcharging standards.

Credit card surcharging standard: The fly in the ointment

Whilst card companies may stipulate a “reasonable limit" how much merchants can charge consumers for using their credit cards, it does not specify what reasonable means.
This will I guess be left to the Trade Practices Act to determine, and regulate, as this seems to fill into the consumer law of equity of contract.

Credit card surcharge standards

And that brings up a question; given the financial services industry's record on setting their own standards, isn't it reasonable that the RBA spend the next six months in talks with the Office of fair trade and the ACCC to nut out some guidelines for these cowboys?
But there are some guidelines of what a reasonable limit might include in the various costs that might come with accepting payment by cards. These include actual fees charged by the credit card providers, the cost of terminals and the like.
One card scheme did propose that the “reasonable” cost recovery should include an appraisal of the benefits merchants get by being able to accept card payment – a concept that could have tied up bank vaults of lawyers and sundry consultants for years to come.

Credit card surcharge relief at last

The obvious change to the consumer will be that Cabcharge 10 per cent rort or that flat whack charged by Qantas and Virgin for actually using a credit card to pay for flights or even buy drinks on board!

Finally we will get a level playing field in the fringe area of credit card  fees and charges, those pushing the envelope surcharges.http://mrmortgage.com.au/